- Tax Increment Financing (TIF) creates special tax districts around targeted redevelopment areas from which future tax revenues are diverted to finance infrastructure improvements and/or development.
- At the beginning of the TIF period, tax revenues in the TIF district going to general city services are frozen at a certain rate. All additional tax revenues go toward directly funding new development or servicing debts related to new development until the end of the TIF period, which usually lasts 20 to 30 years.
- In most states, TIF can only be used in neighborhoods officially designated as “blighted” or “distressed,” and can fund developments ranging from stadiums and convention centers to affordable housing and parks.
- Critics say TIF diverts city tax revenues from schools and other essential community services to the private sector or the pet projects of city officials.
- Supporters say the new tax revenues generated by TIFs would not have taken place “but for” the investment that the TIF enabled, and that they are a valuable tool for neighborhood revitalization.